We estimate that the net proceeds from our issuance and sale of 6,000,000 shares
of our common stock in this offering will be approximately $75.0 million, based
on the initial public offering price of $14.00 per share, after deducting
underwriting discounts and commissions and estimated offering expenses payable
by us. If the underwriters exercise their over-allotment option in full, we
estimate that the net proceeds from this offering will be approximately
$86.7 million.
As of September 30, 2013 we had cash and cash equivalents and investments of
$42.6 million. We currently estimate that we will use the net proceeds from this
offering, together with our existing cash and cash equivalents and investments,
as follows:
. approximately $20 million to fund development of CTP-354;
. approximately $15 million to advance our other current clinical-stage product
candidates and partnered programs;
. approximately $7 million to advance our current pipeline of non-partnered
preclinical product candidates and to research and develop additional
preclinical product candidates; and
. the remainder for working capital and other general corporate purposes.
The expected use of net proceeds from this offering represents our intentions
based upon our current plans and business conditions, which could change in the
future as our plans and business conditions evolve. The amounts and timing of
our actual expenditures may vary significantly depending on numerous factors,
including the progress of our development, the status of and results from
clinical trials, as well as any collaborations that we may enter into with third
parties for our product candidates and any unforeseen cash needs. As a result,
our management will retain broad discretion over the allocation of the net
proceeds from this offering.
Based on our planned use of the net proceeds from this offering and our existing
cash and cash equivalents and investments described above, we estimate that such
funds will be sufficient to enable us to conduct our ongoing CTP-354 Phase 1
imaging study and CTP-354 Phase 1 multiple ascending dose clinical trial, as
well as two planned Phase 2 clinical trials of CTP-354. We do not expect that
the net proceeds from this offering and our existing cash and cash equivalents
and investments will be sufficient to enable us to fund the completion of
development of any of our product candidates.
Pending our use of the net proceeds from this offering, we intend to invest the
net proceeds in a variety of capital preservation investments, including
short-term, investment-grade, interest-bearing instruments and U.S. government
securities.

The biotechnology and pharmaceutical industries are characterized by rapidly
advancing technologies, intense competition and a strong emphasis on proprietary
products. Any product candidates that we successfully develop and commercialize
will compete with existing therapies and new therapies that may become available
in the future. There are a number of large pharmaceutical and biotechnology
companies that currently market and sell products or are pursuing the
development of product candidates for the treatment of spasticity, kidney
disease, neurologic disorders, cancer and inflammation, the key indications for
our priority programs. Several large pharmaceutical and biotechnology companies
have also begun to cover deuterated analogs of their product candidates in
patent applications and may choose to develop these deuterated compounds. In
addition, we know of one small biotechnology company, Auspex Pharmaceuticals,
Inc., and possibly two others, DeutRx LLC and Berolina innovative Research and
Development Services Pharma GmbH, that are developing product candidates based
on deuterium substitution. Potential competitors also include academic
institutions, government agencies and other public and private research
organizations.
Many of our existing and potential future competitors have significantly greater
financial resources and expertise in research and development, manufacturing,
preclinical testing, conducting clinical trials, obtaining regulatory approvals
and marketing approved products than we do. Mergers and acquisitions in the
pharmaceutical and biotechnology industries may result in even more resources
being concentrated among a smaller number of our competitors. Smaller or early
stage companies may also prove to be significant competitors, particularly
through collaborative arrangements with large and established companies. These
competitors also compete with us in recruiting and retaining qualified
scientific and management personnel and establishing clinical trial sites and
patient registration for clinical trials, as well as in acquiring technologies
complementary to, or necessary for, our programs.
The key competitive factors affecting the success of all of our product
candidates, if approved, are likely to be their efficacy, product labeling, side
effect profiles, safety, convenience, price, particularly if there is generic
competition, differentiation from their corresponding non-deuterated compounds
when applicable, and the availability of reimbursement from government and other
third party payors.
Our commercial opportunity could be reduced or eliminated if our competitors
develop and commercialize products that are safer, more effective, have fewer or
less severe side effects, are more convenient or are less expensive than any
products that we or our collaborators may develop. Our competitors also may
obtain FDA or other regulatory approval for their products sooner than we or
our collaborators may obtain approval for ours, which could result in our
competitors establishing a strong market position before we or our collaborators
are able to enter the market.
In addition, we anticipate that some of the product candidates that we or our
collaborators may develop will be deuterated analogs of approved drugs, some of
which are or will then be available on a generic basis. If such deuterated
analogs are approved, we expect that they will compete against branded and
generic non-deuterated compounds in the same indications based on enhanced
efficacy, safety or convenience of dosing. If physicians do not believe that a
product that we or our collaborators develop offers substantial advantages over
the corresponding non-deuterated compound, or that the advantages offered by our
product as compared to the corresponding non-deuterated compound are not
sufficient to merit the increased price over the corresponding non-deuterated
compound that we or our collaborators would seek, physicians might not prescribe
our product.
If the product candidates for our priority programs are approved for the
indications for which we or our collaborators are currently undertaking clinical
trials, they will compete with the therapies discussed below and will likely
compete with other therapies that are currently in development.
CTP-354
We are initially developing CTP-354 for the treatment of spasticity associated
with multiple sclerosis and spinal cord injury. Current first-line treatment for
spasticity includes oral and local agents and physical and occupational therapy.
Four oral drugs have been approved in the United States for the treatment of
spasticity: baclofen (Lioresal), tizanidine (Zanaflex), diazepam (Valium) and
dantrolene (Dantrium), each of which is available on a generic basis. Spasticity
is also treated through localized injections of botulinum toxin. In addition,
there are several potentially competitive product candidates in Phase 3 clinical
development being pursued by pharmaceutical and biotechnology companies,
including GW Pharmaceuticals plc and Osmotica Pharmaceuticals Corp.
CTP-499
The current standard of care for type 2 diabetic kidney disease in patients with
macroalbuminuria is treatment with angiotensin modulators. Angiotensin
modulators are available on a generic basis. We are developing CTP-499 as an
additive treatment to this current standard of care. If CTP-499 receives
marketing approval, it may also face competition from a number of product
candidates that are currently in clinical development, including one potentially
competitive product candidate in Phase 3 clinical development being pursued by
AbbVie Inc.
AVP-786
Avanir is developing AVP-786 for the treatment of neurologic and psychiatric
disorders. There are a number of marketed drugs and product candidates in
clinical development for these indications.

Company Description

We are a clinical stage biopharmaceutical company applying our extensive
knowledge of deuterium chemistry to discover and develop novel small molecule
drugs. Our approach starts with approved drugs, advanced clinical candidates or
previously studied compounds that we believe can be improved with

deuterium
substitution to provide better pharmacokinetic or metabolic properties and
thereby enhance clinical safety, tolerability or efficacy. We believe our
approach may enable drug discovery and clinical development that is more
efficient and less expensive than conventional small molecule drug research and
development.
We have a robust pipeline, including three clinical-stage candidates and a
number of preclinical compounds that we are actively developing. Our clinical
programs are CTP-354 for spasticity associated with multiple sclerosis and
spinal cord injury, CTP-499 for diabetic kidney disease and AVP-786 for
neurologic and psychiatric disorders under our collaboration with Avanir. We
also have ongoing collaborations with Celgene, for deuterated compounds
including CTP-730, which is in preclinical development for inflammatory
diseases, and Jazz Pharmaceuticals, for JZP-386, a deuterated analog of sodium
oxybate, the active ingredient in its marketed drug Xyrem®, which is in
preclinical development for narcolepsy. Between our wholly owned and
collaboration programs, we expect to have up to five product candidates in
clinical development by the end of 2014, including at least two product
candidates in Phase 2 clinical trials.
We believe that our application of deuterium chemistry, which we refer to as
deuteration, is an efficient way to build on existing knowledge to create
important new medicines. Deuterium is similar to hydrogen in size and shape.
However, deuterium differs from hydrogen in one pharmaceutically important
respect – deuterium forms a more stable chemical bond with carbon. This
increased stability has the potential, through the selective substitution of
deuterium for hydrogen, to improve pharmacokinetic and metabolic properties
without changing a compound’s intrinsic biological activity.
Our approach allows us to efficiently identify lead compounds for deuteration
and, in some cases, shorten the amount of time necessary to initiate clinical
trials as compared to conventional small molecule drug research and development.
In clinical development, we believe that the U.S. Food and Drug Administration,
or FDA, and comparable foreign regulatory authorities may allow some of our
compounds that are deuterated analogs of approved products, or of compounds for
which approval is pending, to follow an expedited development pathway by relying
on previous clinical and preclinical data related to the non-deuterated
compound. For example, in June 2013, Avanir reported that the FDA agreed to an
expedited development pathway for AVP-786, permitting Avanir to reference data
from its development of dextromethorphan and quinidine in its investigational
new drug application, or IND, and any future New Drug Application, or NDA, for
AVP-786.
Our senior management team has extensive experience in drug discovery and
development. Collectively, our team has been involved in the research,
development or approval of 12 drugs. Dr. Roger D. Tung, our Chief Executive
Officer and one of our founders, is an accomplished leader in drug research and
development. Prior to founding our company, Dr. Tung was the Vice President of
Drug Discovery at Vertex Pharmaceuticals, Inc., or Vertex. At Vertex, he was a
co-inventor of two drugs that were approved for the treatment of HIV,
amprenavir and fosamprenavir, and oversaw the discovery of two other approved
drugs, ivacaftor (Kalydeco®) for cystic fibrosis and telaprevir (Incivek®) for
hepatitis C. Through September 30, 2013, we had received an aggregate of $105.4
million in upfront and milestone payments, equity investments and research and
development funding from current and former collaborations. Under our current
collaborations, we have the potential to receive up to $1.6 billion in future
milestone payments, including over $1.2 billion in research, development and
regulatory milestones, as well as royalties on any future net product sales.
---
We were incorporated under the laws of the State of Delaware on April 12, 2006
under the name Concert Pharmaceuticals, Inc. Our principal executive offices are
located at 99 Hayden Avenue, Suite 500, Lexington, Massachusetts 02421, and our
telephone number is (781) 860-0045. Our website address is
www.concertpharma.com.

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